Behavior preservation refers to an order in which the court orders the parties to make certain actions or prohibit them from making certain actions before the final judgment is made. China's behavior preservation system draws on the Interim injunction of common law system as well as einst weiliger Rechtsschutz of continental law system, and was originally applied to maritime special procedures and intellectual property field. The Civil Procedure Law, amended in 2012, has unified the behavioral injunction system and extends the scope of behavior preservation to the entire civil litigation field.
According to case retrieval, in recent years, behavior preservation has been widely applied in the fields of intellectual property protection, trade secret protection and unfair competition. There is also relevant juris prudence in other civil disputes. However, in the field of labor disputes, behavior preservation has not been applied so far. In fact, the provisions of the Civil Procedure Law do not exclude labor dispute cases from the scope of application of behavior preservation. And from the original intention of the behavior preservation system and the protection of legal interests, the legal remedy measure of behavior preservation is urgently needed to apply to non-competition disputes of labor dispute field, because of the close correlation between such disputes and the protection of business secrets, the urgency when leaving employees bring trade secrets to competitors, and the probability of irreparable damage to the company if measures are not taken in time.
This paper will briefly introduce the current legislation and judicial practice of behavior preservation in China, and based on this, explore the necessity and feasibility of the application of behavior preservation in the non-competition disputes.
I. Existing legal provisions on behavioral preservation in China
After China's accession to the WTO in 2001, in order to coordinate with the interim measures as stipulated in Article 50 of the TRIPS Agreement, Article 66 of the Patent Law, Article 65 of the Trademark Law and Article 50, paragraph 1 of the Copyright Law and other relevant intellectual property legislation have successively stipulated the content of "stop relevant intellectual property infringement before litigation". According to the above mentioned laws, where an intellectual property right owner or obligee related to intellectual property right has evidence to prove that another is committing or is going to commit an act infringing upon his right, and that his lawful rights and interests will suffer the damage which is difficult to be remedied if he does not stop it in time, he may, before bringing a lawsuit, apply to the people's court for an order to cease the relevant acts.
After the revision of China's Civil Procedure Law in 2012, the application of the behavior preservation system in the field of civil and commercial litigation was uniformly confirmed. Article 100, paragraph 1, of the Civil Procedure Law stipulates: "For a case where, for the conduct of a party or for other reasons, it may be difficult to execute a judgment or any other damage may be caused to a party, a people's court may, upon application of the opposing party, issue a ruling on preservation of the party's property, order certain conduct of the party or prohibit the party from certain conduct; and if no party applies, the people's court may, when necessary, issue a ruling to take a preservative measure."
The Supreme People's Court listed the factors that should be considered by the people's courts in reviewing the application for behavior preservation in Provisions of the Supreme People's Court on Several Issues concerning the Application of Law in Cases Involving the Review of Act Preservation in Intellectual Property Disputes issued in December 2018, including:
- whether the applicant's request has a factual basis and a legal foundation, including whether the validity of the intellectual property requested for protection is stable;
- whether failure to take act preservation measures will cause irreparable damage to the legitimate rights and interests of the applicant, or cause difficulty in the enforcement of the ruling for the case, or cause other damage;
- whether the damage caused by the failure to take act preservation measures exceeds the damage caused by act preservation measures to the respondent;
- whether taking act preservation measures harms public interests; and
- other factors that shall be considered.
The meaning of "emergency" and "irreparable damage" is further explained in the Provisions. Although this judicial interpretation is applicable to intellectual property disputes, the considerations listed in it are of great significance for the behavior preservation application review in the non-competition disputes.
II. Current judicial practice on behavioral preservation in China
From the perspective of the category of disputes, the application of behavior preservation system in China's judicial practice is mainly concentrated in the field of intellectual property. When the court conducts a review of the application for behavior preservation, it mainly focuses on whether the applicant is the right holder or interested party, the possibility of the applicant's appeal, whether it will cause irreparable damage to the applicant if the protection measures are not taken immediately, and whether guarantee will be provided. The prohibited acts include: prohibiting the respondent from disclosing, using the document claimed by the applicant as a trade secret, prohibiting the respondent from using the specific propaganda words, ordering the respondent to immediately stop broadcasting the specific program, and removing the songs involved in the case, etc. .
In other civil dispute fields, the behavior preservation ruling is also widely used in various cases, and the content of preservation is all-encompassing. For example, prohibiting the respondent from using the official seal during the lawsuit, prohibiting the respondent from using or authorizing others to use the involved leased vehicle before obtaining the right to use it according to law, ordering respondent to suspend payment of compensation for demolition, etc. In this kind of behavior preservation decision, the statement of the reason of judgment in the judgment document is usually relatively simple, and the main consideration factor is whether it will be difficult to execute the judgment if no behavior preservation measures are taken.
With the development of the Internet industry and the increasingly prominent attributes of data and traffic properties, the application of behavior preservation in new scenarios has gradually opened. For example, in June of 2019, the Hangzhou Internet Court made a behavioral preservation ruling on the dispute caused by data accuracy in the case of "Ant Financial against Qichacha", ordering Qichacha to take the initiative to make factual clarifications; In the same month, the Haidian district people's court issued the "first data capture injunction in Beijing", ordering the respondent to stop the data capture immediately.
When conducting case retrieval, the authors also noticed another applicable field of behavior preservation ruling under the background of Internet industry, that is, network anchors' "job-hopping" disputes. According to our preliminary research, in 2017-2018, there were 9 cases of network anchor "job-hopping" disputes in which the court made a behavior preservation ruling, prohibiting the respondent ("hopping" anchor) from providing live broadcast service to the live broadcast platform that has a competitive relationship with the applicant, and at the same time prohibiting the competition platform from recording, using, publishing, or playing the live video and audio content of the "job-hopping" anchor in any way. The relationship between the network anchor and the platform has characteristics similar to the employment relationship. The non-competition clause in the cooperation agreement signed between the live broadcast platform and the network anchor is very similar to the non-competition clause under the employment relationship. Therefore, the ruling of behavior preservation in the above-mentioned network anchor "jumping" cases can be used as a reference for implementing behavior preservation in cases of non-competition disputes.
III. The necessity of the application of behavior preservation in the non-competition disputes
As the type of disputes most relevant to the protection of trade secrets in labor dispute cases, the application of the behavior preservation system in non-competition cases has the following necessity:
- Urgency of right protection
Trade secrets have the characteristics of "once published, no longer exist". Once trade secrets are disclosed, used and even made public, they will no longer have commercial value, or will result in the complete loss of the competitive advantage of trade secret rights holders, making the legal rights of trade secret rights holders irreparably damaged. Although the trade secret owner can claim compensation through infringement of trade secret lawsuits, his rights cannot be restored to the state before the violation. Therefore, for trade secret owners, prior prevention is more important than ex post relief. It is the significance of the establishment of the non-competition system to allow that the employer and the laborer to agree on competition restriction agreements and that the laborer be paid compensation in exchange for not working for the employer's competitor for some time, so as to reduce the risk of commercial secrets being disclosed.
- Uniqueness of labor dispute cases
According to Labor Contract Law, the non-competition period agreed between the employer and employee shall not exceed two years. Non-competition disputes belong to labor disputes, and the procedures of labor arbitration – first instance- second instance shall apply. According to relevant laws and regulations, the trial period of the labor arbitration stage is 45 to 60 days, the trial period of the formal procedure at first instance is 6 months (summary procedure is 3 months), and the trial period of procedure at second instance is 3 months. It usually takes more than one year to complete all the procedures. In recent years, the number of labor dispute cases accepted by some labor arbitration committees and courts has soared, and many cases cannot be concluded within the above-mentioned trial limits. In addition, it takes a certain period of time from the departure of the employee to the employer's discovery of former employee's violation of the non-competition restrictions. Therefore, in practice, when the judgment of the second instance takes effect, the period of employees' non-competition restriction is usually expired or about to expire.
Moreover, since non-competition disputes need to go through labor arbitration procedure before entering the first-instance procedure. This means that the disputes have already been heard by labor arbitration committee and the first-instance judge can make a decision on behavior preservation review with a more comprehensive understanding of the background of the case.
- Enforceability of judgment
As mentioned above, when the second instance of the non-competition dispute case is finalized, the period of employees' non-competition restriction is usually expired or about to expire. In judicial practice, even if the court finds that the employee violates the non-competition obligation after leaving the company and does not comply with the non-competition obligation during the period of non-competition, the court will generally not support the company's request that the violation period be deducted from non-competition period or the non-competition period be extended. Therefore, the execution of the judgment will be directly affected if no timely prohibition is made on the behaviors of ex-employees violating the non-competition restriction obligation. In the case that the enterprise cannot ask employees to extend the period of non-competition restriction, it can only ask employees to bear liquidated damages and return the economic compensation paid by the enterprise. The examination by labor arbitration committee or court on the amount of liquidated damages is often strict. They will directly adjust the amount if they deem it too high. In addition, in judicial practice, many job-hopping employees' liquidated damages are actually borne by their new employers. In this case, the consequence of violating the non-competition obligation lacks deterrent force to the illegal employees and their new employers, and it is difficult to achieve the legislative purpose of protecting trade secrets.
- Protection of employees' legitimate interests
In view of the fact that the employee with non-competition obligation shall not join the competitor after leaving the company is the obligation of the ex-employee to perform according to the non-competition agreement of both parties, under the condition that non-competition agreement be deemed legal and effective by the labor arbitration committee or court, it will not cause any harm to the employee to take behavior preservation measures to prevent him/her from providing labor for the competitor.
In addition, the court can require enterprises to provide guarantees when applying for behavior preservation. For example, the amount of the guarantee may be determined as the difference between the employee's full salary from the date of behavior preservation ruling to the date of expiration of non-competition and the economic compensation paid to the employee during this period. The full salary can be calculated according to the amount of the average salary of 12 months before the employee left company. In this case, even if the labor arbitration and the court finally fail to determine that the employee violates the non-competition obligation or even the employee does not need to perform the non-competition obligation, the behavior preservation will not cause obvious losses to the employee. Although if the non-competition agreement be finally deemed invalidated, and the employee does not need to fulfill the non-competition obligation, the employee's legal employment rights may be infringed. However, if the employee's economic income has been fully compensated, the damage to employees is far lower than the damage to the enterprise that may be caused by the leakage of business secrets.
IV Practical advice on behavior preservation application in non-competition cases
In the case of non-competition disputes, enterprises may attempt to submit an application for behavior preservation to the labor dispute arbitration committee or the court, requesting that the former employee who has the obligation of non-competition restriction shall not serve in any form in the competition company. The enterprise can provide evidence on the following aspects:
- The respondent is aware of the applicant's trade secrets and is subject to the non-competition restrictions;
- The applicant has prima facie evidence that the respondent has violated the non-competition obligations;
- Once the trade secrets held by the respondent are disclosed and used, it will cause huge losses to the applicant;
- Failure to take behavior preservation measures may result in the judgment being unenforceable; and
- The applicant will provide reasonable guarantees, and the damages may be caused to the respondent by taken behavior preservation measures will not exceed the damage that may be caused to the applicant by not taken behavior preservation measures.
When receiving the application for behavior preservation submitted by the enterprise, the judge should also review the preliminary evidence provided by the enterprise in accordance with the law, and consider whether or not to approve the enterprise's behavior preservation application based on the facts of the case.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.